In what could be a major relief for the recipients of the R350 Covid-19 Social Relief of Distress grant, a panel of experts has recommended continuation beyond March 2022, and eventually an entry level grant equivalent to the food poverty line at R595.
IN WHAT could be a major relief for the recipients of the R350 Covid-19 Social Relief of Distress (SRD) grant, a panel of experts has recommended continuation beyond March 2022, and eventually an entry level grant equivalent to the food poverty line (FPL) at R595.
The experts have also proposed that the money to fund the Basic Income Support (BIS) be raised through taxation, “spread(ing) any tax burden arising from the BIS across several tax bases as required”.
This was revealed at the launch of the Department of Social Development’s Expert Panel Report on Basic Income Support.
The report aims to provide the government with guidelines around appropriateness and feasibility of extending BIS to citizens between the ages of 18 and 59.
Panellists included Wits Social Security Systems Administration and Management Studies chair, Adjunct Professor Alex van den Heever, Director and Head of the School of Public Management and Administration at the University of Pretoria, Professor Margaret Chitiga-Mabugu, UCT Economics Professor, Murray Leibbrandt and Research Director at the Southern African Social Policy Research Institute, Gemma Wright among others.
Addressing a virtual audience, Social Development Minister Lindiwe Zulu said: “In light of the fiscal constraints, this is the best opportunity for the report to demonstrate how legitimate basic income support can be innovated to protect those who need it, namely those between the ages of 18 and 59.
“We believe that the expansion of the social assistance framework is the key to common and inclusive economic participation, the reduction of inequalities and the real instrument of lifting a large number of South Africans out of poverty. Implemented side-by-side with employment creation and entrepreneurship support initiatives, the expanded social assistance framework can positively impact an individual’s life,” she said.
The report stated that 18 to 59-year-olds were at present left behind by South Africa’s social grant system and the priority was to include this excluded group in the system.
Van der Heever said: “Money income provides access to society in a very fundamental way. Without access to money incomes the result in social exclusion is severe.
“Income poverty is so pervasive that more than half of households live in income poverty. All households in the lower deciles, 1 and 2 which encompass nearly 12 million people and 4 million households fall below the food poverty line of R595 in 2021.”
To assess viability and impact the panel looked at four monthly benefit levels, three of which were specified in relation to income poverty: the R350 value of the Covid-SRD, the food poverty line or FPL at R595, third the lower bound poverty line or LBPL at R860; and fourth the upper-bound poverty line or UBPL at R1,300.
“While the social impacts are quite moderate for lower values of the grant, when introduced at the level of R1,300 per month, poverty measured at the FPL and LBPL is almost eliminated. In these scenarios income inequality (as measured by the Gini coefficient) also improves dramatically from 0.65 to 0.55.
“The starting point should be the existing Covid SRD grant, which appears fiscally and economically feasible until such time as the BIS can be implemented. Here the pragmatic approach is to set the means test at the FPL, or R595 per month, which reflects the grant as implemented in the 2021/22 financial year,” the report stated.
“Second, the Panel sees an entry or lower-level version of the BIS implemented with a threshold equivalent to that used for the child support grant of R4,600 per month and support the accommodation of caregivers in the BIS. This would then take over from the Covid-SRD framework when this can be achieved in a sustainable manner. Third, the Panel sees an upper level, to be achieved over time, set equivalent to the personal income tax (PIT) threshold which stands at R7,275 per month,” the report recommended.
It further found that the expenditure on the grant would generate additional tax revenue arising from the initial changes in consumer demand (for instance revenue from VAT).
In terms of funding BIS, they proposed: “In our view, it would be reasonable to rely on existing and well-established taxes with a demonstrated capacity to raise the necessary revenue in a reliable fashion such as Personal Income Tax (PIT) and VAT.
“New taxes, for instance a wealth tax, could be considered overtime if required as part of government’s financing mix, but be introduced gradually so as to minimise adverse behavioural responses and to ensure they can develop as permanent and reliable elements of the tax system.”
Human rights organisation, Black Sash who had been advocating for the grant said their campaign aligned with the findings of the report.
The organisation’s national advocacy manager, Hoodah Abrahams-Fayker said: “The Black Sash concurs with the report’s recommendations which includes that the most immediate step to permanent Basic Income Support is to institutionalise the R350 Covid-19 SRD grant beyond March 2022. The Covid-19 SRD grant must be used as the baseline for permanent Basic Income Support for the unemployed but must be increased to at least match the Food Poverty Line, currently R624. This will give the government time to put in place the required policy framework to incrementally introduce permanent Basic Income Support for the unemployed pegged at the Upper Bound Poverty Line, currently R1,335, with the proposed phased in approach.”
The findings would be taken to the Finance Ministry to motivate for the implementation of BIS based on its necessity and feasibility.
Finance Minister Enoch Godongwana had previously said it would be up to Cabinet to decide on whether to extend the R350 social grant for unemployment after March 2022, as this was not the decision of the National Treasury alone.